New Zealand dollar rose against all other major currencies after the Reserve Bank of New Zealand left the Official Cash Rate (OCR) – short-term lending interest rate – unchanged at 8.25%. And as it was hinted by Bank Governor Alan Bollard the rate is not likely to be lowered until 2009.Alan Bollard marked labor market problems and the slowdown in housing sector as the main obstacles for the economical growth increasing:
Economic activity has occurred largely as outlined in the September Monetary Policy Statement. Capacity pressures – particularly in the labour market – remain significant, while the housing market has clearly slowed. A substantial income boost is still expected to occur through 2008, as recent dairy price gains reach farmers.
High interest rates in New Zealand for a long time were the main attractor for the Forex traders that favor carry trading. Keeping the rates at 8.25% gave NZD a significant boost against major currencies – NZD/USD increased by more than 0.8% and NZD/JPY gained more than 1.7%. However, this growth might be a temporary speculation which will see some correction today, but if carry trade survives, the general trend for New Zealand dollar will be definitely bullish.
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